THE NEW PANAMA CANAL AND ITS IMPACT ON GLOBAL TRANSSHIPMENT PATTERNS THE ROLE OF REEFERS Capt. Paul J. Gallie Cool Logistics Asia 2016 Hong Kong 7 th September
LET S THINK ABOUT THE FOLLOWING Current and projected ship sizes transiting the Panama Canal Are the ACP figures realistic? The impact on the ship scrapping rate since June 26 th this year Conventional reefers vessels and container ships The impact on smaller vessels carrying fresh produce and other perishable cargoes Is there a possible impact on the frozen and fresh ratio Terminal lay-out dedicated reefer stack in a new reefer transshipment environment Will shipping routes themselves be affected? How likely is this?
WHAT EXACTLY ARE WE TAKING ABOUT? Is this an issue, a problem, an opportunity.?
WHICH CAME FIRST?....the palletised frozen CHICKEN or the palletised fresh EGGS
ACTUALLY THIS LADY CAME FIRST IN 1914
DO BIGGER SHIPS MEAN MORE CARGO?
PANAMA CANAL EXPANSION 8
EXPANDED CANAL - FIRST MILESTONES June 27- First Liquefied Petroleum Gas (LPG) carrier LYCASTE PEACE June 26- Inaugural transit and containership COSCO SHIPPING PANAMA July 6- First vehicle carrier (PCTC vessel) IRIS LEADER July 25- First LNG carrier MARAN GAS APOLLONIA
WHAT MOVES THROUGH THE CANAL? In 2015 nearly 18% of total container traffic through the Canal was reefer 75% of reefer cargo moved through the canal is on container ships
CURRENT SITUATION OF THE REEFER INDUSTRY Worldwide perishable reefer trade increasing at a CAGR of 3.6% Average age of reefer ships is 25 years vs 12 years for container ships Amount of installed plugs is increasing at a much faster pace than the quantity of reefer boxes. For every 40-footer reefer there are more than three plugs available Carriers are unable to increase containerized reefer rates across the board. The supply and demand balance of several major routes are being hampered by the influx of more 8,000 TEU ships. Market share of reefer container ships increasing year by year in comparison to specialized reefer ships (83% vs 18% 2019 forecast )
SHOULD EXPORTERS MOVE FASTER TO CONTAINERISATION? + Long term price projections for oil + Cost (economies of scale) + Constant and unbroken cool chain + Low freight rates, excess capacity! (at least in the short and mid term) - Increased transshipment representing a risk to the speed to market for some destinations with the deployment of bigger vessels - Already existing high level of investment in logistics at destination (exit barrier) - Resistance to change (we have always done it in this way!) - Lack of control of the entire supply chain (ships!)
FURTHER INCENTIVES FOR CONTAINERISATION Panama Canal Opportunities: expanded connectivity opportunities to reach new markets Container terminals in relevant geographies for reefer cargo are or will develop Development of reefer container technology and container monitoring (Maersk, MSC, CMA, HS) Savings already claimed by companies by moving to container ships (Chiquita, Fyffes, etc) New network possibilities for shipping lines (new niche hubs for reefer cargo, shipping line alliances Possibilities to enter new big markets and increase market share (Asia for example)
OUTLOOK FOR CONVENTIONAL REEFER FLEET Conventional reefer specialized fleet will drop from 560 vessels as of June 2015 to 446 vessels in 2019, based on scrapping age of 35 years. Emergence of other growing reefer shipping lines, independently or through alliances / merges Supply and demand might head towards balance as volumes increase. An increasing level of containership demolition and a slight growth in global trade has helped push the supply and demand equation closer towards equilibrium, but further significant changes to the balance will be needed. Top shipping lines gaining market share over mid size and niche carriers. Negotiation power strengthens in the mid to long term for the shipping lines? Age profile of conventional reefer vessel fleet
CURRENT AND PROJECTED SHIP SIZES As of the start of September 2016 the Panamax fleet numbered 855 ships and 3.6m TEU. (ships sized 3000+ TEU with a beam less than 32.3m) Of these 138 operate on services transiting the Panama Canal So only around 18% of the sector in TEU terms appear to be t risk from the Panama Canal expansion Around half of these (72) are charter-owned Source: Clarksons
SHIPPING ROUTES
SHIPPING ROUTES
CARIBBEAN CONTAINER TERMINALS 18
TOTAL WORLDWIDE TRADE OF PERISHABLE REEFER CARGO BY COMMODITY, 2014 (MILLION TONNES)
MAJOR BANANA FLOWS, 2012-2014
MOIN CONTAINER TERMINAL (TCM) A GAME CHANGER To start operations Q1 2018 with 650 meters of berth, 6 STS super post-panamax, 40 hectares of yard. Will enable vessels 3-4 times bigger than max vessel size calling Costa Rica today Capable to receive gearless vessels (contrary to current situation) Will open new market possibilities i.e. vessels from Asia-USEC-Asia might stop in Costa Rica Speed up of containerization Key facts: Quay Length 650m (1,500m full build) Water depth berth 14.5m (initial) 16m (full build) Water depth Access Channel 16.0m (initial) 18m (full build) Maximum capacity (est.) 2.7 million TEU (full build) Concession agreement 33 years (from construction start) Start of operation Q3 2017 (soft 300m) Q1 2018 (full 650m)
TOP 6 EXPORTING COUNTRIES OF PINEAPPLES IN 2014 (MILLION TONNES)
TCM MOIN TCM Moin old terminal Limon old terminal
PUERTO LIMON 24
MOIN 25
TCM TERMINAL UNDER CONSTRUCTION MAY 2015
TCM TERMINAL UNDER CONSTRUCTION SEPTEMBER 2016
TCM TERMINAL LAYOUT REEFER RACKS REEFER RACKS
OPPORTUNITIES FOR 3PL Logistics at origin: as some exporters might get rid-off investments as they move to container ships and terminals develop infrastructure Logistics at the farms: packaging, labeling, sorting Consolidation of different SKUs at origin Data management: for example, administration of information derived from remote control monitoring systems used by the shipping lines Logistics consultancy to reduce electricity costs Quality control
CONCLUSIONS Panama Canal expansion represents an incentive for faster containerization The outlook for reefer cargo is positive in terms of growth, but with some risks Timing for exporters with possibility to make a conversion to containers is critical. Good deals can be achieved now that shipping lines are hungry for volume and with increased capacity, however in the long run, supply and demand might get closer to balance and oil prices might increase. Yet containerization does not come free of risks, however the incentives seem to be much higher than the barriers in terms of value Exporters converting faster to containers might increase market share, since previous experiences indicate a lower cost compared to conventional methods, but containerization also represents improved opportunities for markets such as Asia out of Latin America enabled by the Panama Canal expansion
THANK-YOU Capt. Paul J. Gallie pablo@pabloshipping.com